Obama and the automation myth

According to President Obama, his Administration's anti-free-market, anti-business, and pro-union policies are not to blame for the high rate of involuntary unemployment. No, instead we are to believe a root cause of that problem is too much automation. In an interview on NBC News in response to a question about companies' reluctance to hire, President Obama said:

"...There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate. So all these things have created changes..."

As a country, we are paying a tremendous price for the economic ignorance of this president and his ilk. Even basic economic principles, Econ 101 level stuff, apparently elude them.

The "automation myth" -- the belief that increased productivity, efficiency, and technical innovation lead to net involuntary unemployment as well as other woes -- is Marxist malarkey that won't die. On this topic, the late economist Henry Hazlitt wrote in the best-selling book, Economics in One Lesson (1946):

Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is a long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices...

The belief that machines cause unemployment...leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat...

Blaming unemployment on machinery was common during the Great Depression so it is not surprising, yet still disappointing, to hear President Obama channel his inner FDR (or Rep. Jesse Jackson, Jr.). In the early 1930s, so-called Technocrats traced the economic downturn to an increase in productivity. Of them Mr. Hazlitt wrote:

"The Technocrats were finally laughed out of existence; but their doctrine, which preceded them, lingers on. It is reflected in hundreds of make-work rules and feather-bed practices by labor unions; and these rules and practices are tolerated and even approved because of the confusion on this point in the public mind."

Companies strive to maximize output while minimizing inputs and that's a good thing. (If only government did likewise.) We act similarly in our personal lives. This leads to the most efficient and economical outcomes, guiding scarce resources to where they are needed and valued most.

Using an example of a coat manufacturer, Mr. Hazlitt explains in detail the impact of technological improvements and labor-saving machinery. He writes of all eyes being focused on "Joe Smith," who loses his job to the new machine. Forgotten are " Tom Jones, who has just got a new job in making [or servicing] the new machine," "Ted Brown, who has just got a job operating one, and Daisy Miller, who can now buy a coat for half what it used to cost her." Overlooked too are the manufacturer's higher profits, which are spent on new machines, invested in new businesses or lines of business, and/or consumed, each of which increases employment.

The focus on Joe leads to "reactionary and nonsensical policies" that are ultimately detrimental to everyone else. (How best to deal with Joe's personal situation, which is "incident to nearly all industrial and economic progress," is dealt with elsewhere in the book.)

In short, the "real result of the machine is to increase production, to raise the standard of living, and to increase economic welfare" by lowering prices or raising wages or both. But this president does not get it. So much for "progressives" being for "progress."

According to President Obama, his Administration's anti-free-market, anti-business, and pro-union policies are not to blame for the high rate of involuntary unemployment. No, instead we are to believe a root cause of that problem is too much automation. In an interview on NBC News in response to a question about companies' reluctance to hire, President Obama said:

"...There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate. So all these things have created changes..."

As a country, we are paying a tremendous price for the economic ignorance of this president and his ilk. Even basic economic principles, Econ 101 level stuff, apparently elude them.

The "automation myth" -- the belief that increased productivity, efficiency, and technical innovation lead to net involuntary unemployment as well as other woes -- is Marxist malarkey that won't die. On this topic, the late economist Henry Hazlitt wrote in the best-selling book, Economics in One Lesson (1946):

Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is a long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices...

The belief that machines cause unemployment...leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat...

Blaming unemployment on machinery was common during the Great Depression so it is not surprising, yet still disappointing, to hear President Obama channel his inner FDR (or Rep. Jesse Jackson, Jr.). In the early 1930s, so-called Technocrats traced the economic downturn to an increase in productivity. Of them Mr. Hazlitt wrote:

"The Technocrats were finally laughed out of existence; but their doctrine, which preceded them, lingers on. It is reflected in hundreds of make-work rules and feather-bed practices by labor unions; and these rules and practices are tolerated and even approved because of the confusion on this point in the public mind."

Companies strive to maximize output while minimizing inputs and that's a good thing. (If only government did likewise.) We act similarly in our personal lives. This leads to the most efficient and economical outcomes, guiding scarce resources to where they are needed and valued most.

Using an example of a coat manufacturer, Mr. Hazlitt explains in detail the impact of technological improvements and labor-saving machinery. He writes of all eyes being focused on "Joe Smith," who loses his job to the new machine. Forgotten are " Tom Jones, who has just got a new job in making [or servicing] the new machine," "Ted Brown, who has just got a job operating one, and Daisy Miller, who can now buy a coat for half what it used to cost her." Overlooked too are the manufacturer's higher profits, which are spent on new machines, invested in new businesses or lines of business, and/or consumed, each of which increases employment.

The focus on Joe leads to "reactionary and nonsensical policies" that are ultimately detrimental to everyone else. (How best to deal with Joe's personal situation, which is "incident to nearly all industrial and economic progress," is dealt with elsewhere in the book.)

In short, the "real result of the machine is to increase production, to raise the standard of living, and to increase economic welfare" by lowering prices or raising wages or both. But this president does not get it. So much for "progressives" being for "progress."